Sudden shutdown of Schneider final-mile unit leaves furniture shippers scrambling for options

When truck loading and logistics giant Schneider National Inc. (NASDAQ: SNDR) launched truck loads (LTL) and truck load carriers Watkins & Shepard Trucking Inc. and final mile and IT provider Lodeso Inc . took over, planning to break into the US business-to-consumer e-commerce category with holistic shipping from the first to the last mile for furniture and carpet orders.

The vision died on Aug. 1 when Schneider said it would cease operations of the unit immediately as the company cited results “well below expectations”. The unit struggled despite ongoing investments, most recently in mid-April when Schneider added middle-mile capabilities to connect the network’s multiple terminals. The Green Bay, Wisconsin-based corporation said the unit lost $ 26 million in the first half of 2019 and is on track to lose another $ 9 million in the third quarter. The company will charge pre-tax restructuring charges of $ 50 million to $ 70 million through the year-end, excluding a one-time goodwill impairment charge of $ 34.6 million in the second quarter.

Operations will be completely closed until December 31, 2019. Schneider said he would do his best to include shipments already in the pipeline. Further comments were declined.

The shutdown raises questions about the ability of a truck load carrier culture to adapt to the vastly diverse operational realities of e-commerce fulfillment, with complex hub and terminal operations running counter to the linear network of a truck load carrier. Virtually every truck load carrier has checked the last mile for sales potential, but most have stayed away. Schneider and rival JB Hunt Transportation Services (NASDAQ: JBHT) were the two truckload root hauliers who were most aggressive on the last mile. (Hunt declined to comment on this article.)

For furniture dealers, the questions are less comprehensive and more immediate, e.g. B. who will move goods that are not yet in motion. Founded in 1974, Watkins & Shepard has been the backbone of nearly all furniture retailers’ delivery businesses with a fleet of 943 trucks, 2,043 trailers, and 781 drivers, according to a senior furniture e-tailer who has used Watkins for years. This continued after the takeover of Schneider and is now looking for alternative sources of supply for 70 to 80 percent of the traffic.

Watkins, who focused on the track portion of the Schneider ecosystem, long ago mastered the complexity of the vertical, where a mess could result in claims worth thousands of dollars. Retailers would be more likely to choose an operator like Watkins rather than more generalized providers because damage is too common and costly for the latter group, the executive said.

“There is not a single furniture retailer who does not rely on Watkins to some extent,” said the managing director when asked how many retailers will be affected by the closure.

Since Schneider wouldn’t explain the reasons for closing the store – it may have been a direct move to close a sub-par non-core competency – it’s unclear whether the unit suffered from weak demand, unacceptable costs, or a combination of both. The executive suspected that the problem was with the last mile operation in Lodeso, touted as a “white glove” service, which involved bringing furniture into the house, positioning it in the right place, assembling it if necessary, and reassembling it if necessary old furniture, moved away with all packaging materials.

Lodeso was best known for its technology platform that took and processed online orders from retailers and manufacturers, and connected those requests to an agent network of approximately 600 freight forwarders, one of whom was Watkins. However, performance on the last mile left a lot to be desired, the executive said. The damage was too frequent and the claims were unacceptably high. This resulted in many retailers abandoning the device or avoiding it altogether. According to the furniture e-tailing manager, retailer has never used Lodeso to deliver residential real estate for fear of product damage.

To compound the difficulties of the unit, the high cost of building dense infrastructure on the last mile was borne while demand declined. In June 2016 there were 20 US terminals. This continued a vicious cycle of losses that Schneider could no longer tolerate. The e-tailing manager said the company didn’t use Lodeso and had no issues with the Watkins regular service.

The company assumes that goods already advertised to Schneider will be delivered relatively punctually. Other providers have already lined up to take Schneider’s place, the executive said.

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